How to Teach Kids to be Smart Savers

One of the main goals for parents is to help their children to develop traits that will make them the most successful as they go through their lives. Financial responsibility is one of the most important things that children need to learn from their parents as they are growing up. Seeing their parents being responsible with saving and spending and also learning important lessons early in their lives about their own financial choices will equip children with the tools that are necessary to be smart savers in the future. These are some tips that parents can use to teach their children financial responsibility throughout their years of youth.

Very young children (toddlers and preschoolers) will not be able to understand the concept of saving money as saving money is more of an abstract principle. However, as toddlers get old enough to understand coins, they can start being showed how money is used to buy items that are needed. As they start to count, they will also begin to realize that different items cost a different amount of money. During the earliest years of life it is important to make sure that children understand that things have to be paid for in order to be acquired.

As children enter the early elementary years, they will probably be ready to start receiving an allowance. There is no set amount of allowance that is correct for a child, but an allowance is important so that young children can start learning how to use their own money in their lives. When children have money of their own, parents should start teaching them how to budget their money. One of the best ways to do this is to help children to divide their money into different containers. One container of money can be used to purchase items that they would like to have immediately. The second container can be used to save for larger toys or other items that the children would like to have. The final container of money should be reserved for money that parents would like to have their children save for long-term use, such as for a college account. When children wish to spend their money, help them to understand that the only money that they can spend is from the immediate use fund. When the child has saved enough money for their larger purchase, allow them to make that purchase. They will learn both the importance of saving money and also realize the reward of saving when they are able to make a larger purchase.

During the later elementary years, children will be able to make even more choices about their finances. This is the perfect time for parents to go with their children to the local credit union and open a savings account with their child. As the savings account statements come in, go over them with the children so that they will understand that the money that they are saving is growing. Additionally, children in this age range can also start to be included in discussions about the family’s budget and will probably have some very insightful information to share.

Once children enter the middle school years, they will probably start to have an interest in earning their own money. When children do this by doing odd jobs or even babysitting, they can open a Roth IRA which will allow them to start saving money for retirement. Even a small amount of money that is deposited into a Roth IRA during the early teen years will have the potential of multiplying by 150 times once the child reaches retirement age. In addition to starting to think about retirement, children in middle school will also start to want to make larger purchases or travel with their school. It is important when children start to have this desire that they have some responsibility in their ability to make these trips. Many parents will pay for the majority of a major school trip if their child is willing to pay for a portion of the trip or save the money that they will be spending on the trip.

Children that have the opportunity to learn about money from an early age will have a better chance of being a smart saver as they get older. If parents make the decision to educate their children about the importance of saving from a very young age, the children will be more likely to be smart savers as they grow older. Most importantly, the majority of learning that children do is by example, so if you are a smart spender and saver, there is a better likelihood that your children will develop those traits as well.